Top 8 Payment Industry Trends 2023
The payments industry is changing the relationship between merchants and consumers, and the year 2023 is set to bring additional advances into the mix.
Industry experts see a range of global trends expected to bring advances to the market, including more sophisticated customer journeys, digital wallets, embedded payments, augmented reality, new flavors of buy now, pay later (BNPL) and even a rise in digital currencies. As these become more common, each will have an impact on how merchants and consumers worldwide both interact and transact.
Globally, the rapid expansion in digital and cashless payments continues. One study forecasted global cashless payment volumes are set to increase to almost 1.9 trillion transactions by
2025, representing an 80% increase from 2020.1 The acceleration in digital payments is fueled by continued consumer preferences and shifts in customer behavior that have become permanent post-pandemic.
Prominent trends experts expect in 2023 include these:
1. Customer journeys and loyalty will move front and center with recession looming
As global recession concerns increase, merchants need to keep focused on meeting demand and preferences through every interaction on the customer journey. Attending to how customers shop and what they expect from merchants will be key to responding to customer expectations with an increase in digital experiences. Merchants also need to retain customers in the current climate, where consumers have a multitude of buying options. Loyalty and rewards programs that target specific customer segments are one way to capture consumer interest and help fuel growth in consumer card spend.2
2. Merchant sites to continue adopting flexible payments
In response to the continuing shift in consumer buying habits, an increasing number of merchant sites are offering multiple flexible digital payment options to their customers at various points of the buying experience. Merchants are using flexible payments as a way to strengthen core customer journeys.3 The trend is expected to continue as more consumers demand a frictionless experience for all of their shopping and other payments. According to Nick Maynard, Head of Research at Juniper Research, as digital payments accelerate and more payment types come on-stream, there will be new opportunities to accept rapidly growing payment types. These payment innovations include QR codes as well as new payment technologies such as biometric payment cards, Maynard explained.
3. Merchants are working with software companies for other services
As customers increasingly seek frictionless experiences for their online interactions, merchants are turning to embedded finance and independent software vendors (ISVs) to leverage new transaction methods. According to 451 Research, part of S&P Global Market Intelligence, embedded finance will come to life in 2023, as there is opportunity for brands with loyal followings to incorporate payments into nonfinancial customer journeys. This interest is led by younger consumers, as 37% of millennials indicate they’re extremely interested in accessing financial services from nonfinancial retailers and brands.4 With embedded finance solutions, merchants can offer new payment experiences through platforms, including social media, rewards sites and customer loyalty programs.5
4. Buy now, pay later flexibility remains in high demand in global markets
New solutions for BNPL are being developed in response to strong demand for flexible and alternative payments. Already popular, BNPL has further increased its penetration in global markets as the offering has expanded to more spending and retail categories.2 Data shows that the demand for BNPL is driven significantly by millennial and Gen Z consumers.6 Globally, significant growth is projected over the next five years. For example, in Europe, payment options are reflecting strong consumer preferences for delayed payments and BNPL.7
5. Augmented reality (AR) is set to expand as brands look to elevate experiences
With many consumers window-shopping and buying online, brands are working to attract consumers with innovations that connect AR and retail buying experiences. Gen Z consumers are particularly tech-driven and are willing to spend money through immersive experiences that attempt to duplicate in-store buying experiences by virtual reality and AR technologies.8 Connecting with these younger consumers who are making purchases in virtual gaming worlds is also a growing trend among select brands.9
6. Contactless payments expansion will be led by mobile wallets
With the use of contactless payments varying throughout the world, the trend toward this touchless transaction method is expected to continue expanding as mobile wallets enjoy strong growth over the next few years, according to new data. In particular, the use of card-funded digital wallets is set to climb, as will ACH-funded digital wallets, according to analysts at London-based research firm RBR. Globally, mobile wallets are expected to see a compound annual growth rate of 18% and absolute growth of 129% between 2022–2027.10 Wearable devices for payments are another continuing global trend, as the ease and convenience of payment wearables grow in popularity, with a growth rate of 124% expected over the next five years.10
7. Payments are further adapting to provide quick and customized experiences
Creating customized and personalized experiences for consumers remains a key differentiator for brands and merchants. From a payments standpoint, offering multiple and flexible ways to pay, from digital wallets to BNPL to paying with cryptocurrency, will remain essential in the year ahead and beyond. When consumers have more control over how they pay, their buying satisfaction increases.11 Consumers also ranked real-time payments as the emerging payments use case of most interest to them, with 86% of consumers saying the ability to receive payouts from businesses in real time was especially appealing, while 85% said the same about the ability to pay bills and have them post to an account in real time.12
8. Central Bank Digital Currencies (CBDCs) are gaining momentum
While not yet widely adopted, there is growing momentum globally for the development of Central Bank Digital Currencies. Nick Maynard of Juniper Research notes that the rise of CBDCs will have a major impact as central banks continue to accelerate their plans. According to a recent study from the Bank for International Settlements, more than 90% of the central banks surveyed were engaged in some type of CBDC work.13 Although there are no immediate plans for widespread adoption in major economies, 11 countries have fully launched a digital currency,14 meaning merchants should be aware that central banks and governments are looking in that direction.
1 PwC, 2021. “Navigating the payments matrix.”
2 Euromonitor International, November 2022. “World Market for Consumer Finance.”
3 Boston Consulting Group, October 2022. “Global Payments 2022, The New Growth Game.”
4 451 Research, part of S&P Global Intelligence, December 2022. “2023 Trends in Fintech.”
5 McKinsey & Co., October 2022. “Embedded Finance: Who will lead the next payments revolution?” Viewed 10 November 2022.
6 Juniper Research, August 2022. “Buy Now Pay Later, Regulatory Framework, Competitor Leaderboard & Market Forecasts 2022-2027.”
7 Nets, January 2022. “2022 – the year ‘future payment trends’ become reality.” Viewed 10 November 2022.
8 Forbes, November 2022. “Generation Z Gravitates Towards Immersive Tech-Driven Experiences.” Viewed 24 January 2023
9 YPulse, November 2022. “5 Successful brand experiences in the Metaverse.” Viewed 8 November 2022
10 Juniper Research, December 2022. “Contactless Payments, Key Opportunities, Emerging Trends & Market Forecasts 2022-2027.”
11 Recharge, September 2022. “Mobile payments: Definition, history & trends for 2023.” Viewed 9 November 2022.
12 451 Research, part of S&P Global Market Intelligence, Key Findings: Global Fintech Vendor and Consumer Study commissioned by Discover Global Network, completed August 2022.
13 Bank for International Settlements, May 2022. Gaining momentum – Results of the 2021 BIS survey on central bank digital currencies. Viewed 10 November 2022.
14 Atlantic Council. “Central Bank Digital Currency Tracker.” Viewed 16 February 2023.
The information provided herein is sponsored by Discover® Global Network. It is intended for informational purposes, and is not intended as a substitute for professional advice.